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Constellation Energy Group (NYSE: CEG - option chain) shares have moved higher today after French power company EDF offered a $6.5 billion bid for half of CEG's nuclear business and other assets. The offer challenges an earlier bid from MidAmerican, a unit of Berkshire Hathaway (NYSE: BRK.A).
If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CEG.
CEG opened this morning at $30.00. So far today the stock has hit a low of $27.37 and a high of $30.17. As of 12:35, CEG is trading at $28.04, up $2.89 (11.5%). The chart for CEG looks neutral and S&P gives CEG a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $22.50 range.
A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverages nice returns. For this particular trade, we will make a 4.2% return in just three weeks as long as CEG is above $22.50 at December expiration. Constellation would have to fall by more than 19% before we would start to lose money. Learn more about this type of trade here.
CEG hasn't been below $22.50 since October and has shown support around $23 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in CEG or BRK.A.
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